December 29, 2015
Mortgage rates moved slightly higher today. While it wasn't a big move in the grand scheme of things, rates were already fairly close to their highest levels since early July. For most lenders, that means conventional 30yr fixed rates in the 4.125-4.25% range for top tier scenarios.
The day began decently enough, with underlying bond markets mostly holding their ground--especially the mortgage-backed-securities (MBS) that dictate mortgage rates. The first rate sheets of the day were actually in line with--or slightly better than--yesterday's latest rate sheets. As the day progressed, MBS were eventually pulled down by significant weakness in the Treasury market, resulting in mid-day 'reprices' from most lenders.
While this move higher could merely be an incidental byproduct of the year-end trading environment, it's a safer bet to take it seriously as it runs the risk of foreshadowing an even sharper move in the coming days. That sounds scary. It might even turn out to be scary. If it doesn't, you might kick yourself for locking, but if it does (turn out to be scary), you might kick yourself harder for not locking in the next 24-48 hours.
Loan Originator Perspective
"Bonds sold off amid an equities rally today, and rates are nearing the highs we saw mid December. Consumer sentiment surpassed expectations today, but it still looks like we're just bouncing up/down through our recent rate range. My current pipeline is 100% locked, but for new applications, I'll likely wait until Monday when trading returns to usual, rather than exaggerated holiday movements as we're seeing today." -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 4.125-4.25%
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.25-3.375%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- 2015 has been largely about global interest rates rising unevenly from a long-term low brought about by the onset of quantitative easing in Europe. European rates are most directly affected, but rates in the US have often taken cues for similar movement.
- As the European rate rally fizzled out, the Fed began telegraphing its intent to hike rates. While the Fed rate doesn't directly affect mortgages, the two are still loosely connected over time. They become more disconnected when the economy begins to contract. This helps longer term rates like mortgages move lower even while the Fed rate his steady or rising.
- The Fed finally hiked on December 16th, but there was no immediate reaction in mortgage rates. Some think that an economic contraction might not be too far away. Others are concerned about a lack of inflation (which is good for longer term rates like mortgages). Bottom line: the Fed rate hike has not been the death knell for low mortgage rates that many feared it would be, although the near term range is uncertain and rates could be more volatile than normal as we wait for a new trend to emerge.
- As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, conventional 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.' Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy. It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).